SMH seeking to improve cash position

Cuts planned, board forms ad-hoc committee

MANISTIQUE – Schoolcraft Memorial Hospital is exploring options to bolster and prevent further loss to its cash reserves. The SMH board approved various measures Monday, including phasing out the private duty aspect of its home care program, as well as cutting back the payment-in-lieu of insurance option for its employees.

According to Clyde Strasler, treasurer, the finance committee held a meeting on June 16 and a year-to-date loss of $432,000 was recorded for the hospital. In June alone, the hospital lost $204,000, writing off $103,675 in bad debts.

Despite the losses, the building department approved spending just over $7,000 on moving the hospital’s home care operation to its old medical office building and renovating the space for that purpose. The home care operation had been working out of a downtown office building.

Strasler also reported that, while inpatient revenue is $125,000 above expected revenue, outpatient is $1,048,000 under what was anticipated for this time of year. Outpatient services include general surgery, CAT scans, physical therapy, emergency room visits, orthopedic outpatient surgery, pharmacy, MRI and radiology.

The hospital’s home care is currently $9,000 below budgeted revenue, while physician practices are down almost $90,000 from what was budgeted. Strasler noted the hospital is continuing to watch many of its expenses closely, including contractual services and supplies.

Trustee Robert Root said that the group, in a previous meeting, had discussed identifying cost containment measures, “in light of our negative trend line.”

Though some cost-cutting proposals related to contracts couldn’t be discussed in the open meeting, SMH CEO George Montgomery did outline others, including the phase-out of private duty services in the home care department.

“The private duty piece is the mostly nurse aid services that we provide through the UPCAP agency to help people, basically, stay out of nursing homes,” he said. “The program doesn’t cover its costs, there’s another provider in the county, and, certainly, we’d probably be better served

The private duty services will be phased out by September. Montgomery would not estimate how many employees the cut would affect.

Another potential cost-saving measure would affect the payment in-lieu-of-insurance option currently offered to employees.

“We pay employees who do not take our health insurance, in other words, it’s a payment that they receive every month,” he said. “A number of years ago, we froze that payment to employees … we now would like to roll that back by 15 percent and save some dollars.”

He noted the employees would receive notice before the change is put into place.

In order to increase revenue, Montgomery noted the hospital will be participating in the 340B Drug Pricing Program with Putvin Health Mart, ShopKo, and a Curtis pharmacy. The program requires drug manufacturers to provide outpatient drugs to eligible health care organizations/covered entities at significantly reduced prices.

Root expressed concern in the options presented by Montgomery.

“Looking at the identified savings for the few items that were mentioned, and the other items here, I don’t think that it’s necessarily enough to really start protecting our cash position and rebuilding it, and that’s what we’re after,” Root said.

He suggested the board again seek more cost-saving measures and look in a “very serious way” at the hospital’s finances.

“There’s just things going on in our medical field and the industry as a whole that’s outside of our control,” he said. “I don’t think that we can just step back and kind of ignore our cash position has been shrinking, and hope that things will turn around … I think there’s some proactive things that we can do.”

Root said an ad-hoc committee could be set up and charged with the task.

“I would suggest … that an adhoc type committee be set up and that it be charged with looking at our financial position in great detail and have all things on the table – all issues on the table, including personnel,” he said. “I think, if we’re looking at structural changes, payroll is one of them.”

He added the hospital’s cash position is in “significant, critical shape” and needs to be addressed before next month’s meeting.

Chairperson Don Perigo suggested Strasler be a part of the committee, which Root seconded. The board members unanimously approved the formation of the ad-hoc committee (Trustee Jim Ostlund was absent).

Root noted the hospital would be facing financial difficulties whether they built the new facility or not.

In other business, the board approved sending the application of Ernie Krueger, chief financial officer and executive vice president of Mackinac Financial Corporation and mBank, to the Schoolcraft County Board of Commissioners. Krueger is looking to fill a trustee position recently vacated by John LaRose.